Passenger Railway Services (Public Ownership) Bill

Simon Lightwood Excerpts

2nd reading
Monday 29th July 2024 Commons Chamber

[The Parliamentary Under-Secretary of State for Transport (Simon Lightwood)]

May I first congratulate you on your election, Madam Deputy Speaker? It is a pleasure to close the debate with you in the Chair.

It may have escaped the notice of Opposition Members, but there was a general election, and there is a reason for the fact that they are sitting on that side and we are sitting on this side. However, I have enjoyed listening to the many maiden speeches that have been made today. It has been just over two years since I made my own maiden speech, and I found it extremely nerve-racking, so I am greatly impressed and, I have to say, somewhat intimidated, by the quality of the speeches made today. I am also grateful to colleagues for their considered contributions, and I will attempt to respond to as many questions and concerns as possible. Where I have not been able to do so, I will follow those up with a letter.

Let me begin by dealing with the issue of public ownership. According to the shadow Secretary of State, the hon. Member for Faversham and Mid Kent (Helen Whately), we have no proof that it will improve outcomes for passengers, but that is clearly not the case. We know for a fact that this Bill will save tens of millions of pounds in fees, and if that is not a good start, I do not know what is.

Furthermore, as the Secretary of State explained earlier, this reform is based on solid evidence. In fact, the public sector has an incredibly strong record of successful delivery, including increased reliability—even when dealing with operators that were previously failing financially, or otherwise failing to deliver for passengers.

I am confident that public ownership will provide the right foundations to drive forward improvements for passengers—be it simplifying the arcane fares system, integrating rail with other transport or improving accessibility. First and foremost, it will deliver the standards of reliability that the travelling public have every right to expect. I remind the House that this is one of two Bills, and that the second will deliver the Government’s wider plans for rail. As my hon. Friend the Member for Luton South and South Bedfordshire (Rachel Hopkins) says, those wider plans are absolutely designed to put passengers back at the heart of the railways and will introduce new measures to protect their interests.

Let me assure the shadow Secretary of State that the wider railways Bill is absolutely a priority for this Government, unlike the previous Government, who had years to bring forward legislation to reform the railways and only got as far as a draft Bill. We are not delaying; rather, we are taking the time to develop the much larger Bill properly, so that it delivers the benefits that we have promised. I look forward to bringing it before the House later in this Session when parliamentary time allows. Under that Bill, the Secretary of State will be the passenger-in-chief and hold Great British Railways to account for delivering for passengers and freight. We will also create a powerful passenger-focused watchdog, the Passenger Standards Authority, to independently monitor standards and champion improvement in service performance against a range of measures.

I am glad that the issue of freight has been raised today. Alongside the overall growth targets set by the Secretary of State, the wider railways Bill will include a statutory duty on Great British Rail to promote the use of rail freight, to ensure that freight remains a key priority.

My hon. Friend the Member for Middlesbrough and Thornaby East (Andy McDonald) is absolutely right to say that it is shameful that the previous Government’s approach to industrial relations was a failure, which inflicted two years of disruption and misery on millions of passengers. By contrast, this Government will work with unions to mediate disputes. In her first weeks in office, my right hon. Friend the Secretary of State has met representatives of the relevant unions.

My hon. Friend the Member for Hertford and Stortford (Josh Dean), in an excellent maiden speech, raised a very important point about staff shortages on our railways. That is a result of the previous Government’s failure to plan properly for the future, leading to skills and recruitment gaps. It is, of course, important that the right staff with the right skills are in the right place at the right time to provide the level of service that passengers expect and deserve. My ministerial colleagues and I look forward to working with train operators and trade unions on this issue. I wish my hon. Friend well in his endeavours to bring more young people into politics—something we should all be passionate about.

On ticket fares, I share the shadow Secretary of State’s ambition for lower fares for all passengers. We are taking pragmatic steps towards that and are committed to reviewing the overly complicated fares system, with a view to simplifying it and introducing digital innovations. We will explore the options for expanding ticket innovations such as digital pay-as-you-go and digital season tickets across the network. We are aware that increasing passenger numbers is critical to this plan, and that is what our simplified system will aim to do.

The shadow Secretary of State and the hon. Member for Bexhill and Battle (Dr Mullan) raised concerns about the ideology of our approach. I can assure them that our plans are not a return to the days of British Rail and that our approach is not ideological; it is pragmatic. We will take the best lessons from the public and private operation of railways. It is about making sure that the system is right, with checks and balances, growth incentives and proper accountability. We have been clear that our approach means a relentless focus on the interests of passengers and the taxpayer above all else. The same applies to the shadow Secretary of State’s claim that the Government’s plans are about putting politicians in charge, which could not be further from the truth. The point of Great British Railways is to get day-to-day decisions out of the hands of politicians and into the hands of those who are best placed to make such decisions, with the needs of the passenger and the freight user at the heart of the whole system.

The shadow Secretary of State mentioned the Chancellor’s statement. The Chancellor has made some very hard decisions on the basis of the dire financial situation that we have inherited from the previous Government, but this does not change the fact that providing better transport for our citizens is an absolute priority, and we will not waver in our pursuit of better rail services for all.

I also thank the hon. Member for Bath (Wera Hobhouse) for her comments and share her view that intervention is needed. However, let me assure her that we are well aware that this cannot come at the expense of other vital services. I assure her that our plan to fix Britain’s railways is fully costed and will be delivered within our fiscal rules. It will improve services and reduce costs to the public purse.

The hon. Members for Bath and for Moray West, Nairn and Strathspey (Graham Leadbitter) and my hon. Friend the Member for Easington (Grahame Morris) also highlighted the role of the rolling stock leasing companies. This is another area where the Government’s approach is pragmatic, delivering value for the taxpayer and not driven by ideology. It would not be responsible to spend billions of pounds of taxpayers’ money buying up existing rolling stock, especially when, as my right hon. Friend the Chancellor of the Exchequer has set out this afternoon, we face a £22 billion black hole in the public finances created by the Conservatives.

I completely agree with the right hon. Member for Aldridge-Brownhills (Wendy Morton) on the importance of rail links to local communities, and I welcome her constructive attitude to this debate. I deeply sympathise with the points she made, and those made by the hon. Member for Didcot and Wantage (Olly Glover), my hon. Friend the Member for Liverpool Wavertree (Paula Barker) and others, about the Avanti West Coast service. As my right hon. Friend the Secretary of State set out, she has already met with Avanti to make her expectations clear. However, the right hon. Member for Aldridge-Brownhills will appreciate the need to bring services into public ownership as existing contracts expire, to avoid the need to pay a penny in compensation to the operators for earlier termination. That does not change the fact that the Government care deeply about performance and will hold private operating companies to account for the remainder of their contracts.

To reassure my hon. Friend the Member for Derby North (Catherine Atkinson), I will also highlight that contracts can be terminated early if the relevant contractual conditions are met, and we will not hesitate to do so if needed. She also raised the important issue of ticket office closures, as did the hon. Member for Taunton and Wellington (Mr Amos) in his excellent maiden speech. I confirm that this Government have no plans to close ticket offices.

The right hon. Member for Aldridge-Brownhills and the hon. Member for Bexhill and Battle also asked about open access services. We have been clear that there will remain a role for open access services, with existing operators continuing to operate on the network alongside publicly owned services, where they add value and capacity to the network.

Finally, the hon. Member for Brighton Pavilion (Siân Berry) highlighted the role of Transport for London and Merseytravel. How to secure the delivery of services in those areas will remain a matter for local leaders. The wider railways Bill will give local leaders a statutory role in governing, managing, planning and developing the rail network. This, along with our plans to give local authorities more control over bus services through our better buses Bill, will make it more straightforward to integrate the railways with other forms of transport.

I would like to thank hon. Members again for an excellent and considered debate on this “Cinderella topic”, as the hon. Member for Didcot and Wantage called it, and I welcome further engagement from both sides of the House as the Bill progresses. With that, Madam Deputy Speaker, I commend the Bill to the House.

Question put, That the Bill be now read a Second time.

Passenger Railway Services (Public Ownership) Bill

Simon Lightwood Excerpts

Committee of the whole House
Tuesday 3rd September 2024 Commons Chamber

I want to finish my first speech in Parliament by thanking the people of North Warwickshire and Bedworth for sending me to this place to do this very special job. The people of my constituency are down to earth, straightforward, direct, honest, hard-working people. Those are the values that I was raised with, and those are the values that will continue to guide me in my role. I am so very proud to be representing North Warwickshire and Bedworth and all its towns and villages—my home—and I have not underestimated the challenges ahead. I promise I will work hard and do my very best for all my constituents, and stay true to my values, for as long as I have the honour of representing them in this place.

[The Parliamentary Under-Secretary of State for Transport (Simon Lightwood)]

It is an honour to serve under your chairmanship, Madam Chair. I thank hon. Members of all parties for their amendments, and for their considered contributions. I commend those Members who have delivered some fabulous maiden speeches today, with such quality, passion and dedication to serve, and a love for their communities. It makes me really proud to be a Member of this House, and I am certain that the memory of delivering their maiden speeches will live with them forever.

I will begin with amendments 18 and 8 to 12, tabled by the hon. Member for Faversham and Mid Kent (Helen Whately). These relate to monitoring, reporting and scrutinising the impacts of public ownership and the effectiveness of train operators. Amendment 18 would require the publication of two reports. The first would outline the anticipated impact of public ownership. That would simply duplicate the impact assessment published earlier this year, and therefore would be redundant. The second report would assess the actual impact of public ownership, some years after implementation. A wide variety of data is already routinely published about both public and private sector train operators’ performance. That includes reliability, punctuality, service quality, customer complaints and financial performance among other measures. The Bill does not change any of that and there is no need to wait five years to consider whether train operators’ performance is improving.

Amendment 9 would require the Secretary of State to procure independent reports about the costs of the contracts awarded to public sector operators. The Department already publishes information on payments made to operators, whether private or public. There is therefore no need for the taxpayer to fund a separate body to report the same data. Nevertheless, the hon. Lady is entirely right to take an interest in the cost of these contracts. In that spirit, I would gently remind her that ending the taxpayer funding of private profits will result in an immediate and enduring reduction in these costs.

Amendment 9 also raises the specific question of whether public ownership will expose the Government to liabilities that have previously sat with private operators. Under the current national rail contracts, the Government fund the costs legitimately incurred by train operating companies. That includes, for example, the net operational cost of running services and the cost of meeting pension liabilities. Prior to the pandemic, franchised operators bore some cost risk, but were protected by the taxpayer against, among other things, inflation and, in more recent contracts, risk on movements in pension deficit recovery payments. The franchising system meant that bidders simply priced any change in liabilities into their bids, meaning that the taxpayer was exposed to liabilities in the long term. Public ownership therefore does not materially change the Government’s exposure to liabilities in the long run.

Amendment 10 would require the annual reporting to Parliament on various aspects of the performance of public sector operators, and amendment 12 would require an independent report on the impact of public ownership on the performance and efficiency of the UK rail network. Again, data is already published on a wide variety of aspects of train operator performance, including by the Office of Rail and Road in its role as a regulator. The Bill does not change that. The Office of Rail and Road also provides independent scrutiny of the performance and effectiveness of Network Rail, enforcing compliance with its licences and conducting five-yearly reviews that set its funding and what must be delivered with that funding.

Amendments 8 and 11 look to require independent monitoring of the financial and operational performance of public sector train operators. The Department holds train operating companies to account for their financial management through regular reviews of their management accounts and business plans. That applies to both public and privately owned operators. In addition, in England publicly owned operators are overseen by DFT OLR Holdings Ltd, known as DOHL. As a holding company owned by the Secretary of State, DOHL is experienced in reviewing and monitoring the financial arrangements of the companies it manages, and contrary to what the hon. Lady said, it is building its capacity in readiness to take over more services. At the same time, public ownership will reduce the other contract management costs, because there will no longer be the same commercial tension of the taxpayer interacting with private profit. Amendment 8 refers specifically to the auditing of publicly owned train operating companies’ accounts. It is already the case that DOHL and the operators it oversees must publish their audited accounts annually.

Turning to amendment 11, train operators are already monitored under their existing contracts against targets for punctuality, reliability and service quality. They are also held to account for managing within pre-set cost budget limits each financial year. Driving up operators’ performance in those areas is vital, and the Government will continue to review train operator performance regularly in those and other areas. This has been an early priority for my right hon. Friend the Secretary of State. For example, in her first weeks in office, Ministers held meetings with the managing directors of Avanti West Coast, TransPennine Express and their Network Rail counterparts to set clear expectations for immediate improvement. In parallel with these arrangements, the Government are developing detailed proposals for holding the future Great British Railways to account for performance. This will form part of the broader package of reform that we will set out in the forthcoming railways Bill. We expect these arrangements will be in place long before the five-year reviews proposed in a number of amendments tabled.

Amendment 11 also refers to performance improvement plans. Mechanisms to require improvement plans are already a feature of the Government’s contracts with both public and private sector operators. The Secretary of State has recently put in place formal remedial plans with CrossCountry in view of its unacceptable levels of cancellations and service reductions. Finally, amendment 11 raises the question of senior management remuneration when performance is poor. This matter can be considered when remedial plans are being put in place, taking account of the circumstances in each case.

Amendment 19, also tabled by the hon. Lady, and amendment 20, from the hon. Member for Bath (Wera Hobhouse), both propose additional procedural steps to be followed before a contract is awarded to a public sector operator. Amendment 19 would require the Office of Rail and Road to publish an opinion on the practicability of transferring services to each public sector operator. Clearly it is vital that services are transferred to public ownership smoothly, without detriment to the quality of service during the transition. For that reason, the transfer of services will take place using a well-established arrangement and process. DOHL has significant experience of managing the transition of services from private to public operation in recent years.

[Helen Whately]

Will the hon. Gentleman give way?

[Simon Lightwood]

I will not give way to the hon. Lady, as she has had plenty of time to put her case.

Those transfers of services have been completed successfully and smoothly despite the challenging timescales and circumstances, which have included financial failure and poor operator performance. We have also made it clear that we will transfer services on a phased basis as existing contracts expire over the next few years. This is a measured, responsible approach that will further de-risk the process. The Bill does not alter the ORR’s role in granting operators’ licences and issuing their safety certificates; in that role the ORR already independently assesses the suitability and readiness of any operator, public or private, to take over services and operate them safely. In light of those safeguards the Government do not see the need to commission further analysis from the ORR, as amendment 19 proposes.

On amendment 20, the Department for Transport has already awarded multiple contracts to publicly owned operators and has considerable experience of managing them in practice, taking legal, financial and technical advice as needed. We consider a new independent advisory body to be an unnecessary additional step that would add cost and risk delaying progress. I can assure the hon. Member for Faversham and Mid Kent that the Department for Transport is conducting a full review of the standard terms of service contracts entered into with public sector operators, reflecting the fact that public sector operation is to be the Government’s long-term approach, not just a temporary measure of last resort.

On amendments 13 and 14, the Government do not consider it appropriate to spell out such specific contractual requirements in primary legislation, which would risk constraining future flexibility to adapt operators’ contractual obligations to suit changing circumstances. On amendment 13 specifically, it would not be efficient for the taxpayer to require up to 14 different operators in England, plus those in Scotland and Wales, to each pursue its own separate wide-ranging innovation strategy. Indeed, a key purpose of our wider reform plans is to drive a much more coherent cross-industry approach in such areas. On amendment 14, I question why the four groups identified, while clearly of course very important, should be singled out for a specific mention when there are many other relevant considerations to take into account in service design, including the interests of the taxpayer, freight users, people with disabilities and residents of urban areas to name just a few. The list could be endless, and the important point is that decisions about future service levels should take into account all relevant considerations.

Amendment 1, tabled by my hon. Friend the Member for Blackley and Middleton South (Graham Stringer), would remove the power of the Secretary of State to continue existing franchises. I am happy to reassure my hon. Friend that this provision is included in the Bill as a contingency measure only. It exists in case a short continuation is needed to ensure that services transfer to public ownership smoothly and without disruption to passengers. It is intended to be used only in exceptional circumstances and only for so long as necessary to ensure the smooth transfer. It will be available to the Secretary of State only when

“it will not be reasonably practicable”

for a transfer to proceed. Any continuation would be limited by procurement regulations to a maximum of two years in duration, but in practice we would expect the period to be much shorter. The power is clearly transitional in nature; once services are transferred to the public sector it will no longer be relevant, and clause 2 therefore gives us the power to repeal it in its entirety. This is a sensible, pragmatic precaution that exists simply to smooth the transition to public ownership and protect the travelling public from disruption. I hope that explanation offers my hon. Friend some reassurance.

I move now to amendment 6, tabled by the hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter). The Bill does not affect the provision of rolling stock. It would not be responsible or affordable for the Government to take on the cost of renationalising billions of pounds-worth of rolling stock when there are so many other urgent pressures on the public purse. However, public ownership will open the door for a much more coherent approach to planning the longer-term rolling stock needs of the whole industry. Once Great British Railways is established, planning the provision of rolling stock across the network will be one of many areas where a single directing mind for the railway will add real value.

We will develop a long-term industrial strategy for rolling stock that supports manufacturing, innovation and interoperability and aligns with the wider objectives of the industry. It will look to end the boom and bust cycle of rolling stock procurement, ensure sustainable pipelines for future work and consider the best financing structures for future orders in partnership with private capital. I can assure my hon. Friend the Member for Easington (Grahame Morris) that we will consider the points he has raised as we undertake work on this matter. My officials are engaging with Eurofima to consider the potential of UK membership and the role that could play in the UK market. We will set out more plans on that in due course. A report mandating that in primary legislation is therefore not necessary in the Government’s view.

Amendment 7, tabled by my hon. Friend the Member for Derby North (Catherine Atkinson), seeks details of the Government’s proposed approach to procurement and the impact of public ownership on the procurement process and the supply chain. She is absolutely right to highlight the crucial role of the broad and diverse private sector supply chain in helping to deliver high-quality rail services, and I very much welcome the contribution made by businesses in her constituency and right across the country. I can assure her and those businesses that innovation and technical progress will remain as fundamental as they have ever been in delivering improvements for passengers, cost efficiency for taxpayers and benefits for the environment.

I can confirm that there will be no immediate impact on the approach to procurement when services transfer to public ownership. Existing private sector operators are already required to follow the same procurement rules as public sector operators. Under the governance reforms, Great British Railways will provide much clearer long-term direction across the whole railway system, giving businesses and the supply chain the certainty and confidence they need to plan, invest and innovate for the future.

Amendment 15, tabled by the hon. Member for Faversham and Mid Kent, considers the Bill’s potential effects on open access operators. The Bill is specifically about the ownership of services currently operated under the contract with the Secretary of State and Scottish and Welsh Ministers. Public ownership of those services will not prevent open access services from running as they do now. The report proposed by her amendment is therefore unnecessary. However, I take this opportunity to reassure her about the role of open access in the future in the context of the Government’s wider reforms. How we make use of network capacity and grant access is fundamental to the performance of the railway and what it delivers for all its users. Open access operators such as Hull Trains, Lumo and Grand Central are a valuable part of our railway. We are keen for such services to continue to operate alongside publicly owned services, where they add value and capacity to the network.

The hon. Lady’s amendment 16, along with amendment 22 from the hon. Member for Bath and amendments 2 to 5 from the hon. Member for Brighton Pavilion (Siân Berry), touches on the role of devolved and local authorities in the planning and delivery of rail services. Amendments 16 and 22 each refer to exemptions granted under section 24 of the Railways Act 1993. Those exemptions allow services in London and the Liverpool city region to be procured by the relevant authorities in those areas, outside the franchising system. The Bill makes no change to those existing arrangements and it will remain for those authorities to decide how best to deliver the services for which they are responsible.

Amendments 2 to 5 would allow the Secretary of State and Scottish and Welsh Ministers to award contracts to companies owned by certain elected public bodies. While the Government are committed to strengthening local involvement in the planning and delivery of rail services, it will be important to ensure that does not undermine the plan for Great British Railways to act as a directing mind that provides coherence, consistency and clarity for the whole railway. To support that, the Government intend to award contracts specifically to public sector companies owned by the Secretary of State via DOHL.

[Wera Hobhouse]

Our amendment 22 is not just about the current arrangement with Merseyrail and Transport for London; it is much more about having the discussion about how local authorities and local areas can enter into franchising agreements in future if they so wish.

[Simon Lightwood]

I do not think that the Bill stops them doing that now, though we have no plans to extend the scope of that.

Looking ahead to the railways Bill, the Government have already said that there will be a statutory role for devolved leaders in Scotland, Wales and mayoral combined authorities in governing, managing and planning and developing the railway network. That will ensure that decision making is brought as close as possible to local communities.

I turn to amendment 17, tabled by the hon. Member for Faversham and Mid Kent, which proposes an independent body to advise the Government on employment terms and pay for rail staff under public ownership. That is an important issue, and one that the Government are determined to get right. My officials are at the early stages of exploring a number of options—including a pay review body—so that we can consider the most appropriate approach to meet the needs of a transformed industry.

Last but by no means least, I come to amendment 21, tabled by the hon. Member for Bath, which deals with fares, ticketing and passenger compensation. Naturally, we are keen to see rapid progress in those areas. We are committed to reviewing the overly complicated fare system. Change is already being delivered by extending pay-as-you-go in the south-east and through fares reform on LNER. We will explore the options for expanding ticketing innovations such as digital pay-as-you-go and digital season tickets across the network, and we will hold operators—and, in due course, Great British Railways—accountable for progress on these vital reforms. We also intend that a powerful new passenger watchdog—the passenger standards authority—will independently monitor standards and champion improvement in service performance against a range of measures.

I thank hon. Members on both sides of the Committee for their contributions to the debate. I hope that my responses will have provided the explanations and reassurances that colleagues were seeking, and that that will enable them not to press their amendments and to support the Bill on Third Reading.